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Wang watches CA from afar

Newsday Staff Writer

October 30, 2006

Ever since Computer Associates co-founder Charles Wang retired as chairman in November 2002, his life has taken a sharply different turn from that of his one-time protégé and successor, Sanjay Kumar.

As Kumar this week is scheduled to be sentenced following his guilty plea to 10 counts of securities fraud, obstruction of justice and conspiracy, Wang has been at a safe distance from the proceedings. Kumar faces decades in jail and hundreds of millions of dollars in restitution payments. Wang, who was the founding chief executive of CA until 2000, has not been charged with any crime, and his name has barely surfaced in the $2.2-billion accounting scandal, except in civil cases, press reports and criticism from longtime CA gadfly Sam Wyly.

But Wang's distance from trouble isn't that much of a mystery. Wang, in interviews during the 1990s, often deferred on matters of operational detail to Kumar. Wang, the theory goes, was the company visionary who had happily turned over day-to-day running of the company to the multitasking and intelligent Kumar.

But there are other factors that have kept Wang out of the prosecutorial limelight. First and foremost, people familiar with the investigation have said that there was not sufficient evidence to charge him with crimes. He was questioned by Sullivan & Cromwell lawyers hired by the board to investigate matters after the government turned up the heat on CA in 2003, and they never uncovered evidence of his involvement.

Perhaps just as important, Wang had left the company by the time the more serious crime of obstruction of justice became a pattern at CA as top executives and a company lawyer tried to cover their tracks.

"He got out early, before the full extent of the scandal became apparent," said Ross Albert, a former Securities and Exchange Commission special counsel who is now an attorney at Morris Manning & Martin in Atlanta. "The government just couldn't get the strong evidence to tie him to any of those crimes. You could say maybe there's no evidence to be had."

But Wang received a jolt last week when former CA executive vice president Chris Wagner, in a sworn statement during sentencing hearings for Kumar, suggested that Wang had been in meetings where the practice of holding open fiscal quarters to pile on more sales, in violation of SEC rules, had taken place. Wagner later corrected the statement to Bloomberg News, saying Wang had been in general sales meetings, not the so-called 35-day month meetings.

"I think the recent testimony about Wang's involvement raises additional questions about the responsibilities of the existing board," said Gary Lutin, an investment banker who runs a CA shareholder forum.

Even if Wang had attended those meetings, the dearth of documentary evidence linking him to specific crimes would be equally problematic.

It's been widely reported that Wang not only discouraged the use of e-mail among his own employees during peak business hours, but that he also shunned it himself. Much of the incriminating evidence against Kumar surfaced in retrieved e-mails and other company documents.

"I can say with some amount of certainty that a fair number of government investigators and attorneys did their level best to make a case against Wang," said Albert, discussing the general practice of prosecutors' leaving no stone unturned. "At this late date, it appears they weren't able to make that case."

To what level Wang cooperated in the investigation once he left the company has remained something of a mystery. A person familiar with the probe said Wang was not given a grant of immunity but fully cooperated with the government. Yet, none of the papers filed in the criminal cases against the half-dozen prime government targets makes reference to an unnamed witness of Wang's stature or apparent knowledge.

In the end, as people close to the Wang camp have maintained all along, it may just be that Wang was hoodwinked by Kumar, eased out by a board that backed his protégé and has watched from a distance as the company he created suffered numerous body blows - damage that Wang is said to be saddened by.

Their relationship ended shortly after Wang left; he and Kumar haven't spoken in years, and Wang's wife, Nancy Li, was unceremoniously walked from the building while Kumar was chairman. They unwound their partnership in the New York Islanders hockey team and real estate ventures in a deal that pays Kumar $1 million a year for the next nine years, and forgives an unspecified loan by Wang.

The only remaining link may be the appearance of their names on lingering civil litigation that seeks to return not only the ill-gotten gains of those convicted of wrongdoing, but also money from those who had oversight roles, and who received bonuses during the improprieties. At least two lawsuits seek to invalidate an agreement three years ago that released all executives and board members from potential liability over the accounting fraud.

CA itself is expected to soon present a plan to a Delaware court for pursuing ill-gotten gains, including perhaps hundreds of millions of dollars received by Kumar and others.

It's uncertain, and perhaps unlikely that Wang is on that list, according to a person close to the company. Lack of charges against him provides him a considerable defense against the civil charges. He's expected to vigorously defend against the notion that bonuses and pay received during the period of others' wrongdoing merits giving back all or a portion of those funds. Either way, Wang continues to invest his CA-made fortune, and heavily on Long Island. He wants to revitalize Oyster Bay and Plainview, and his plan to create a Nassau hub around the Coliseum is likely to be one of the more ambitious of its kind in the region.

Still, former SEC lawyer Albert said Wang probably won't walk away completely unscathed.

"His reputation has certainly been tarnished," Albert said. "He probably won't be on the short list for corporate boards or executive positions." 


Copyright Newsday Inc.



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